1. Global Vegetable Oils Market Trends: Demand Analysis and Strategic Planning Initiatives Yasutomo Kojima Joe Parcell Jewelwayne Cain Department of Agricultural and Applied Economics University of Missouri-Columbia

2. Introduction Vegetable oils consumption, production and trade have become one of the global topics of interest due to several factors: (i) rising global demand for vegetable oils, especially in emerging economies (ii) health problems related to trans fats (trans fatty acids: TFA) (iii) increasing use of vegetable oils as biofuels feedstock along with crude oil price surge (iv) international concerns over the environmental impacts of palm logging In these circumstances, in order to understand global vegetable oils market trends, it has become essentially important to analyze global demand for vegetable oils from the aspects of food use and industrial use, and to clarify the demand structure of edible and non-edible vegetable oils.

3. The Objective of This Study The objective of this paper is to estimate demand function of vegetable oils for food use and industrial use with cross-country panel data of 156 countries to investigate global demand structure of edible and non-edible vegetable oils to think about strategic planning initiatives

4. Previous Research (1) Empirical analysis of food, biofuel and energy markets. There are mainly three types of approaches, such as 1) Theoretical models (Gardner 2007; de Gorter and Just 2008; de Gorter and Just 2009) 2) Cointegration analyses (Yu et al. 2006; Hameed and Arshad 2008; Peri and Baldi 2010) 3) Partial and general equilibrium (CGE) models (Arnt et al. 2008, Kancs and Wohlgemuch 2008) 4) Theoretical and empirical analysis (Ciaian and Kancs 2011) In order to empirically analyze vegetable oils market based on those theoretical models, we need to estimate demand elasticities of vegetable oils from a global perspective. Currently, the USDA Economic Research Service (ERS) does not provide elasticity estimates of vegetable oils to the public.

5. Previous Research (2) From a regional perspective, Goddard and Glance (1989) analyzed demand relationships among twelve fats and oils in United States, Canada and Japan with data of per capita disappearance from 1962-86. Their study did not include rapeseed oil in the demand equation for the U.S. in their model. And also, they excluded sunflower oil in the model for three countries because some data was unavailable over some or all of the estimation period.

6. We focus on global markets of four vegetable oils: soybean oil, rapeseed oil, palm oil, sunflower oil We estimate own- and cross-price elasticities in the global market and identified income elasticities by geographic regions of Africa, America, Asia, Europe and Oceania for food use and industrial use, respectively. Edible: Food 52.6% in 2009 Non-Edible: Feed, Seed, Waste, Processing and Other Utilities 47.4% in 2009 Demand elasticity estimates will be useful for future research, such as policy analysis related to the area of agriculture and energy. Demand Analysis Soybean Soybean Meal Soybean Oil Rapeseed Oil Palm Oil Sunflower Oil Soybean Complex

7. Table 1. World Average of Edible Vegetable Oils Consumption per Capita Source: FAOSTAT.

8. Table 2. Edible Vegetable Oils Consumption Share by Region Source: Own calculations based on FAOSTAT.

9. Table 3. Change in Edible Vegetable Oils Consumption Share from 1990s to 2000s Source: Own calculations based on FAOSTAT. Note. These data show the difference in consumption share (%) from 1990’s to 2000’s.

10. Figure 1. World Average of Edible and Non-Edible Vegetable Oils Consumption per Capita Source: Own calculations based on FAOSTAT.

11. Table 4-1. Summary Statistics

12. Table 4-2. Summary Statistics Edible Non-Edible

13. Table 4-3. Summary Statistics EdibleNon-Edible 2000-2004 Average 2005-2009 Average

14. Table 5. Rate of change in the mean of consumption and real price Long term Change: 1990-1999 to 2000-2009 Average Short term Change: 2000-2004 to 2005-2009 Average

15. Table 6. Real GDP Per Capita

16. Demand Model for Edible Vegetable Oils Double-log demand model for four edible vegetable oils PCCON F,i,t ： per capita quantity of vegetable oil i consumed for food use at time t C i : constant term of vegetable oil i’s consumption p j,t : real price of vegetable oil j (j = 1…4) at time t x t : real GDP per capita at time t, D r : region dummy variable (1 or zero) for five regions Africa, America, Asia, Europe and Oceania where countries are located D pe : preference dummy variable (1 or zero) for each country’s preference for a certain type of edible vegetable oil i. ε i,t is a zero-mean, normally distributed constant variance disturbance C i, γ ij, β i and τ i are parameters to be estimated

17. Demand Model for Non-Edible Vegetable Oils Double-log demand model for four non-edible vegetable oils PCCON F,i,t ： per capita quantity of vegetable oil i consumed for food use at time t C i : constant term of vegetable oil i’s consumption p j,t : real price of vegetable oil j (j = 1…4) and crude oil j (j=5) at time t x t : real GDP per capita at time t, D r : region dummy variable (1 or zero) for five regions Africa, America, Asia, Europe and Oceania where countries are located D pn : preference dummy variable (1 or zero) for each country’s preference for a certain type of non-edible vegetable oil i. ε i,t is a zero-mean, normally distributed constant variance disturbance C i, γ ij, β i and τ i are parameters to be estimated

18. Table 7. Estimation Results (156 Countries for 1990 - 2009)

21. Figure 2. Cross-Price Effect on Global Demand for Edible and Non-Edible Vegetable Oils Note. Arrow represents the direction of cross price effect on demand for the other vegetable oils at least the 10% significance level.

22. Figure 3. World Average of Non-Edible Vegetable Oils Consumption per Capita and Crude Oil Nominal Price

23. Strategic Planning Initiatives 1) Policy and regulation: e.g. Trans Fats Issue 2) Competitive product positioning: e.g. Emphasis on a vegetable oil’s positive characteristics 3) Technological innovation: e.g. High-oleic soybean innovation and commercialization Key Point: Cost Performance after Quality Innovation Because our paper finds that soybean oil price plays a central role in demand determination of other edible vegetable oils in a global market of edible vegetable oils through its cross-price substitution effect.

24. Thank you for your attention.